The basis for the proper conduct of business operations are primary documents. They, in turn, form the accounting of income and expense, the composition of the costs of both production, primary or secondary, and for management purposes.
Writing off materials to production should occur in accordance with the Law, PBU and the Methodological Instructions of the Ministry of Finance of the Russian Federation.
Material and production costs can be written off:
- Based on the cost of each individual unit of goods.
- Based on the average cost.
- According to the FIFO method (when the cost of goods purchased in the first reporting period is taken into account).
- According to the LIFO method (when the calculation is made at the cost of goods purchased recently).
The methods of writing off materials to production are carried out in different ways and depend on which group of materials and components are included in the accounting group and what accounting policy the company adheres to.
Write-off taking into account each unit (at cost)
Accounting for the release of materials into production at cost and taking into account each item of the item is convenient when the list of goods in a small organization is not too extensive and the consignment of goods is small, and the path of each consignment is easily traceable, and the prices of goods are stable throughout the sales period. In this case, cancellation can occur at the very prices at which they are accepted. There are two options by which materials can be written off into production:
- The cost includes all expenses that went to the purchase of goods.
- The method is simplified when the cost is taken into account at the price of the contract, and all other expenses are written off based on the proportionality of the amount written off to the production materials (also at contract prices). This method is used in the case when the amount of transport and procurement costs is difficult to identify.
Write-off of materials to production at cost calculated on average
For each type of goods, the amount is determined, which is the sum of the balance at the beginning of the month, plus all receipts during the month (total cost) and is divided by the number of materials (balance plus receipt). Thus, revealing the average cost of goods, we multiply it by the amount corresponding to the period of write-off. The average cost will change as soon as the movement of goods.
The first option is called a weighted estimate, the second - a moving one. The choice depends on the purpose pursued when using the method. When the data are prepared for the report for any period, a balanced assessment is needed, and when materials are written off to production, then a rolling cost estimate is used.
FIFO Method
Despite the fact that the FIFO method is also used in two versions, the balance in the warehouse of raw materials and (or) materials remains unchanged. Whereas it would be difficult to distribute the cost of goods accepted for purchase and put into production in accordance with a certain batch with a large list of items, especially if the receipt of goods or raw materials occurs quite often.
This method is fixed in accounting by order of the head and is used at the enterprise for at least a year, according to the Accounting Regulation (paragraph 21), since depending on the movement of market prices, the difference between the purchase price and the initial accounting price will, accordingly, reduce or increase profits .
LIFO Method
The inverse method is the writing off of materials to the production of the category that has arrived recently, and only then - those goods that came earlier.
- When writing off, they take the cost of the raw materials that were purchased first in time, then (sequentially) the second batch, etc.
- Then they write off at the price of the last batch purchased. The result of the reporting period (month) is determined by the usual summation of the balance and income for the month, based on the price of the first acquisition of materials.
Whatever the methods of writing off materials to production, no matter how the materials and raw materials are dispensed from the warehouse, the movement of goods should be documented, always based on primary documents, unified and drawn up in accordance with Article 9, Clause 2, Law No. 129 FZ .